US Trustee objects to “Chief Restructuring Officer.”

The US Trustee is a permanent court official whose main duty is to oversee trustees appointed in individual cases; only occasionally does he intervene in chapter 11 cases, where there is no trustee unless the court orders one appointed. But he just appeared to oppose NRA’s motion that it be allowed to hire a CRO.

You can download the pdf opposition here:

I am told that debtors in chapter 11 try to hire a CRO where they think the court may be skeptical of their leadership’s ability to honestly restructure the company. The pitch to the court is that “maybe you don’t trust us, but you can trust this person to do the job.” The catch is that the CRO is their employee so they can order or forbid him to do things in his reorganization plan. NRA leadership earlier proposed a different person for CRO, and it’s said he refused, probably because of the restrictions put upon him.

The Trustee seems to have foreseen this. He argues,

“Even to the extent the CRO reports to the SLC (special litigation committee), the CRO is not independent because the SLC is a creature of the board and current management and can be terminated by the board and current management. The SLC itself, as a special committee, possesses only limited powers under the NRA’s bylaws.5 Although it is very hard to trace lines of authority within the NRA given the complex array of authorities emanating from the bylaws to the membership, board, executive committee, standing and special committees, and employees, it is clear from the application that the CRO is not independent and probably cannot be independent absent additional eleventh hour changes to the corporate governance structure of the NRA, if permitted at all under the applicable state corporate law.”

“The NRA has already admitted at trial in this case that serious financial irregularities occurred and continued. On April 7, 2021 – a day when Mr. LaPierre was testifying — Mr. LaPierre finally signed and submitted the NRA 2021 financial disclosure of interest (NRA Ex. 661), revealing several personal benefits linked to NRA vendors — including multiple trips on a yacht. These irregularities allegedly were committed by, or occurred under the oversight of, the same NRA management and corporate governance bodies to which the CRO would report. NRA management and board entities allegedly have been tainted, and if an investigation or independent fiduciary is required, then that fiduciary cannot be a creature of the NRA but must be an independent fiduciary provided for by the Bankruptcy Code.”

The US Trustee did a better job of reading NRA’s Bylaws than did NRA’s attorneys. He points out that the CRO might be an NRA officer and the Bylaws say only the members can create a new NRA officer,

“It is not clear whether the NRA’s bylaws permit the creation of a chief restructuring officer position. The NRA’s most recent Bylaws incorporate input from the NRA’s membership and confer limited authority to officers and committees. The NRA’s Bylaws state that certain “AMENDMENTS IN BOLD FACE ITALICS SHALL NOT BE REPEALED OR AMENDED BY THE BOARD OF DIRECTORS.” Instead, Article XV, Section 4, reserves authority to amend bylaws in bold and italics to the NRA’s membership. Article V, Section 1(b), describes the specific officer positions, and in bold italics, states “The Board may not abolish said offices nor create any other offices.” 

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